The Republic had a strong tax evasion culture which ran through every section of society, the Taoiseach, Mr Ahern, told the Public Accounts Committee yesterday.
He said that even before the DIRT legislation of 1986 there had always been a compliance problem with non-resident accounts.
"I think there is a culture here where people will try, wherever they have the opportunity, to evade tax," he said in response to Ms Mary Irvine SC, who asked him "where do you think it all went wrong?".
Whenever ministers for finance and the legislature attempted to plug the holes, "somebody, usually the following day or that night, is sending out brochures around the town finding ways of unplugging them". He had had numerous debates with the Institute of Taxation, chartered accountants and "my own professional group" about the definitions of avoidance and evasion when he was minister for finance, he said.
Like the other four former finance ministers, Mr Ahern said he had no knowledge of the internal Revenue instruction, SIM 263, which prohibited tax inspectors from examining non-resident declaration forms, until last week. He was not aware the powers of the Revenue were not being enforced, he told Mr Frank Clarke SC. It was a complete surprise.
The Revenue people he had dealt with were always "very professional", he said. He had introduced four Finance Bills in three years. "Normally if they got powers they believed were adequate, they implemented them."
At no stage was it suggested to him that Revenue powers of inspection under Section 37 of the 1986 Act should be increased. Practically everything that "was given to me" in 1992 by the Revenue he had "agreed to run with". Ms Irvine sought clarification of a reference by the Taoiseach in his opening statement to the committee about "alarm bells ringing".
"The alarm bells, I think, were ringing that if we were to toughen up on our powers, we would, perhaps, get in more money." At the same time he was conscious that in introducing full exchange control liberalisation, money could leave the State.
The 1993 tax amnesty, he said, had raised £238 million. "It could be argued in its justification that it helped to broaden the tax base." The negative reaction to it, however, had ensured there would not be another one.
Mr Ahern took issue, however, with evidence given earlier to the committee by Mr Tony Mac Carthaigh, a senior tax inspector on the special savings accounts, "which I legislated for".
Mr Mac Carthaigh had "made a sweeping charge", Mr Ahern said, that "anyone could open up these accounts all over the place". He had referred to these accounts as the "new tax evasion of the Nineties". The legislation was designed to ensure that this would not happen. "There is no evidence whatsoever that it has happened and in the Comptroller and Auditor General's report he seems to indicate that it hasn't happened". He had not seen anything from Revenue to indicate that it had, Mr Ahern added.
For many years in Ireland financial institutions were held up as models of integrity and probity, said Mr Ahern. He hoped to see that situation restored.
In reply to Mr Clarke, who referred to the "two strands of your role as minister for finance", he said he would have expected ACC as a State-owned bank to have informed him about "any significant non-compliance with its tax or indeed any other legal obligation".
He had a number of meetings with both the chairman and chief executive of the bank during February 1993.
"The new Fianna Fail-Labour government had a proposal on third banking which required me to have a number of meetings with ICC, ACC and TSB." At no time had the issue of non-compliance been mentioned.